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[Law Basis]
[Print]
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Chapter 3 Detailed Provisions – Operation and Management of Foreign Exchange Business
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Section 1 Securities Related Business Involving Foreign Exchange
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Subsection 1 Foreign Currency Denominated International Bond Business
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〈Proprietary trading of foreign currency denominated international bonds〉
Article 19
Securities enterprises that have obtained the qualification to engage in
proprietary trading of domestic bonds may also engage in proprietary trading
of foreign currency denominated international bonds without making an
application.
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〈Financial consulting business involving foreign currency denominated international bonds〉
Securities enterprises that have obtained the qualification to underwrite
domestic bonds may also offer financial planning, evaluation and consulting
services relating to foreign currency denominated international bonds in
accordance with the following rules without making an application:
1.The securities enterprise may not engage in underwriting on a firm commitment
basis or a standby commitment basis;
2.The securities enterprise may not be involved in receipt/payment between the
issuer and the investors.
3.The securities enterprise may not report the commencement of underwriting
foreign currency denominated international bonds business by offering
financial planning, evaluation and consulting services relating to foreign
currency denominated international bonds.
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〈Application to engage in underwriting of foreign currency denominated international bonds business〉
Article 21
A securities enterprise that intends to engage in the underwriting of foreign
currency denominated international bonds shall apply to the Bank for approval
by submitting documents provided in Article 7 herein and documents evidencing
its qualifications as specified below:
1.Having the qualification to underwrite domestic securities.
2.Meeting one of the criteria below:
(1)Having a long-term credit rating of BBB (or equivalent) or higher for the
latest year from a credit rating agency approved or recognized by the FSC
or an internationally known credit rating agency; or
(2)For a branch of a foreign securities firm in Taiwan, its head office has
practical experience in underwriting foreign securities.
3. The regulatory capital adequacy ratio shall meet one of the following
requirements:
(1)For domestic securities firms, the regulatory capital adequacy ratio in the
six months before the date of application shall be at least 200%; for banks
and bills finance companies engaging concurrently in securities business,
the regulatory capital adequacy ratio shall reach the statutory ratio;
(2)For branches of foreign securities firms in Taiwan, their head office shall
meet the criteria provided in the preceding item or Paragraph 3, Article 59
of the “Regulations Governing Securities Firms”.
4. Free of any of the following sanctions:
(1)Any sanction imposed by the FSC during the preceding one year acting pursuant
to any of Subparagraphs 2 ~ 4, Article 66 of the “Securities and Exchange
Act”; and
(2)Any sanction during the preceding one year whereby the TPEx, acting pursuant
to its operating rules or bylaws, has suspended or restricted the firm's
trading privileges.
5. No accumulated loss as shown in its latest CPA audited or certified financial
statements.
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〈Receipt/payment associated with underwriting foreign currency denominated international bonds business〉
Article 22
When a securities enterprise engages in the underwriting of a foreign currency
denominated international bond, receipt/payment between the enterprise and the
investors/issuer shall always be made in the denominated currency of the
international bond.
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Subsection 2 Proprietary Trading of Foreign Securities Business
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〈Application to engage in proprietary trading of foreign securities〉
Article 23
A securities enterprise that has obtained the qualification to engage in
proprietary trading of domestic bonds may also engage in proprietary trading of
foreign securities without making an application. However if such trading is
neither an investment of proprietary funds nor done to meet hedging purposes,
the securities enterprise shall apply to the Bank for approval by submitting
documents provided in Article 7 herein and photocopies of the latest CPA
audited or certified financial statements, procedures for handling
receipt/payment, process description and other documents required by the Bank.
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〈Receipt/payment associated with proprietary trading of foreign securities〉
Article 24
When a securities enterprise engages in business mentioned in the preceding
article, related receipt/payment shall always be made in the denominated
currency of the security.
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Subsection 3 Offshore or Foreign Currency Warrant Business
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〈Scope of offshore or foreign currency warrant business〉
Article 25
The business scope of call (put) warrant issued by securities enterprises
involving foreign exchange (hereinafter referred to as “offshore or foreign
currency warrant business”) includes the following:
1.For domestic call (put) warrants involving foreign securities or indices of
foreign securities markets, the scope of the underlying shall conform to
relevant regulations stipulated by the FSC.
2.For offshore call (put) warrants involving domestic securities or indices,
the scope of the underlying shall be limited to domestic stocks or baskets of
stocks, domestic exchange traded securities investment trust funds, offshore
ETFs, and Taiwan depositary receipts.
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〈Application to engage in offshore or foreign currency warrant business〉
Article 26
A securities enterprise that intends to engage in offshore or foreign currency
warrant business shall apply to the Bank for approval by submitting documents
provided in Article 7 herein, and in addition, documents specified below:
1.Qualification certificates issued by the FSC and the competent authority in
the place where the offshore warrants will trade; and
2.Business plan (including product profiles, operational guidelines and risk
management).
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Subsection 4 Business of Accepting Orders to Trade Foreign Securities
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〈Application to engage in the business of accepting orders to trade foreign securities〉
Article 27
A securities enterprise that intends to accept orders to trade foreign
securities for the first time shall apply to the Bank for approval by
submitting documents provided in Article 7 herein, and in addition, a
business plan (including operational principles and business practice,
procedures of receipt/payment handling and operating process).
When a securities enterprise already approved by the Bank to accept orders
to trade foreign securities with receipt/payment of settlement and fees in
foreign currency intends to engage in receipt/payment in NTD, the securities
enterprise shall apply to the Bank for approval with the following documents：
1. A photocopy of the Bank’s letter of approval for the securities enterprise
to accept orders to trade foreign securities with receipt/payment of
settlement and fees in foreign currency;
2. A photocopy of letter of approval from the FSC;
3. A statement supporting that the applicant’s computer system is able to meet
the requirements set out in Article 28 herein regarding receipt/payment in
different currencies; and
4. A description of the controls for receipt/payment of settlement and fees in
different currencies.
When A DSF that accepts orders to trade foreign securities with receipt/payment
settled in foreign currency intends to keep the customer’s settlement funds in
a segregated foreign currency account opened with the authorized bank
(hereinafter referred to as "customer’s foreign currency account"), the DSF
shall first apply to the Taiwan Stock Exchange (hereinafter referred to as
“TWSE”) for approval and then report to the Bank for record by submitting a
description of operations (including the operating process of receipt/payment
handling and the foreign exchange settlement against NTD in the customer’s
foreign currency account) one week before the date of commencement. The DSF
shall forthwith inform the Bank when the customer’s foreign currency account
is suspended or reinstated.
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〈Receipt/payment associated with the business of accepting orders to trade foreign securities〉
Article 28
A securities enterprise that accepts orders to trade foreign securities shall
comply with the following rules with regard to receipt/payment of settlement
and fees with customers:
1. When a customer designates the settlement to be made in a foreign currency,
the related receipt/payment shall be made in the foreign currency; and
2. When a customer designates the settlement to be made in NTD, the related
receipt/payment shall be made in NTD.
A DSF that keeps the customer’s settlement funds in the customer’s foreign
currency account shall comply with the following rules regarding the scope of
the customer’s foreign currency account, transfer or payment of funds, and
declaration of the foreign exchange settlement against NTD：
1. Funds retained in the customer’s foreign currency account are limited to
the settlement amount, fees and related distributable dividends and interest
after executing the order to sell/buy foreign securities.
2. Funds deposited in the customer’s foreign currency account shall only be
transfered through the following means：
(1) To be paid for the settlement amount in foreign currency in connection
with the securities business with the DSF.
(2) To be transferred, in accordance with the customer's instructions, to
the customer's personal subaccount of the DSF’s other custodial account
set up according to the FSC’s relevant regulations, or to the customer's
personal bank deposit account agreed upon in advance between the DSF and
the customer.
3. A DSF handling the foreign exchange settlement against NTD or the conversion
between foreign currencies shall comply with the provisions of Article 53
herein and assist the customer to declare the settlement in the name of the
customer.
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Subsection 5 Business of Trading Foreign Bonds as an Agent
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〈Application to engage in trading in foreign bonds as an agent〉
Article 29
A securities enterprise that intends to trade foreign bonds as an agent shall
apply to the Bank for approval by submitting documents provided in Article 7
herein, and in addition, a business plan (including business profile, operating
process and risk management).
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〈Receipt/payment associated with the business of trading foreign bonds as an agent〉
Article 30
When a securities enterprise trades foreign bonds as an agent, payment shall
be remitted by the buyer directly into an account designated by the foreign
financial institution. The receipt/payment for investment, redemption, and
settlement, fees charged by the foreign financial institution and other fees
shall be made in foreign currency.
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Subsection 6 Business of Acting as a Participating Dealer of an Offshore Exchange Traded Fund
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〈Application to act as a participating dealer of an offshore ETF〉
Article 31
When a securities enterprise intends to act as a participating dealer for an
offshore exchange traded fund (hereinafter referred to as “ETF”) to process
(on a brokerage basis) or engage in (on a proprietary basis) purchase or
redemption of an offshore ETF in Taiwan (hereinafter referred to as “offshore
ETF participating dealer business), the securities enterprise shall apply to
the Bank for approval or report to the Bank for record by submitting the
following documents before commencing the business:
1.When acting as a participating dealer of an offshore ETF for the first time,
the securities enterprise shall apply to the Bank for approval by submitting
documents provided in Article 7 herein, and in addition, documents evidencing
approval from or completing effective registration with the FSC for the ETF
and a business plan (including business profile, operating process,
receipt/payment procedure, and hedging arrangements).
2.When the securities enterprise subsequently intends to act as a participating
dealer for another offshore ETF, it only needs to report to the Bank for
record before commencement by submitting documents evidencing approval from
or completing effective registration with the FSC for that ETF.
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〈Receipt/payment associated with the Offshore ETF Participating Dealer Business〉
Article 32
When a securities enterprise engages in Offshore ETF Participating Dealer
Business, receipt/payment between the participating dealer and investors
shall always be made in the denominated currency of that offshore ETF as
listed on the centralized securities exchange market.
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Subsection 7 Business Involving Domestically Issued Foreign Currency Denominated ETFs
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〈Participating Dealer Business of Domestically issued Foreign Currency Denominated ETFs〉
Article 33
A securities enterprise that intends to act as a participating dealer for a
domestically issued foreign currency denominated ETF to process (on a brokerage
basis) or engage in (on a proprietary basis) purchase or redemption of foreign
currency denominated ETFs shall apply to the Bank for approval or report to the
Bank for record by submitting the following documents before commencement：
1. When acting as a participating dealer for a domestically issued foreign
currency denominated ETF for the first time, the securities enterprise shall
apply to the Bank for approval by submitting documents provided in Article 7
herein, and in addition, the following documents：
(1) Qualification approval letter from TWSE;
(2) Participation contract of the foreign currency denominated ETF; and
(3) A business plan (including the business profile, foreign exchange
settlement matters involved in the planning for the foreign currency
funds, and hedging arrangements).
2. When the securities enterprise subsequently intends to act as a participating
dealer for another domestically issued foreign currency denominated ETF, it
shall report to the Bank for record before commencement by submitting the
documents provided in Items (1) and (2) of the preceding paragraph.
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〈Acting as a liquidity provider for domestically issued foreign currency denominated ETFs〉
Article 34
For a securities enterprise to act as a liquidity provider for a domestically
issued foreign currency denominated ETF, the provisions of the preceding article
shall apply mutatis mutandis to the procedure and documentation required for
applying for the business. Notwithstanding the foregoing, the documents
provided in Item (2), Subparagraph 1 of the preceding article shall be
substituted with the liquidity contract on the domestically issued foreign
currency denominated ETF.
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〈Proprietary or broker trading of domestically issued foreign currency denominated ETFs〉
Article 35
Securities enterprises that have obtained the qualification to engage in
proprietary trading of securities or to accept orders to trade securities
on the centralized securities exchange market may also engage in proprietary
or broker trading of foreign currency denominated ETFs without making an
application.
When engaging in the business mentioned in the preceding paragraph, a
securities enterprise shall comply with the following rules:
1.Receipt/payment between the securities enterprise and investors regarding
the purchase and sale of a foreign currency denominated ETF shall be made in
the denominated currency of that ETF.
2.A foreign currency denominated ETF may not be an underlying product in margin
purchase and short sales, securities borrowing and lending, borrowing or
lending money in connection with securities business, or borrowing or lending
money without specific purposes by securities firms, and other relevant
businesses.
3.NTD denominated ETF positions acquired through margin purchase or borrowing
may not be converted into foreign currency denominated ETFs.
4.When the trading order of an investor to buy a foreign currency denominated
ETF fails to be executed and if the securities broker has collected payments
from the investor in advance, the securities broker shall return the advance
payments no later than the next business day following the trading day.
5.When an investor’s amount receivable is greater than the amount payable on
the same settlement day, the securities enterprise may sign an intra-day
overdraft contract with the settlement bank to facilitate timely settlement
with the investor.
6.In the case of out-trade, an investor default on a sale, or an overseas
Chinese or foreign investor requesting a delay in settlement, the securities
enterprise may apply to TWSE for borrowing securities to cover the settlement.
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Subsection 8 Offshore Fund Master Agency Business
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〈Application to engage in offshore fund master agency business〉
Article 36
A securities enterprise that intends to act as the master agent of an offshore
fund institution in the offering and sale of its funds in Taiwan (hereinafter
referred to as the “offshore fund master agency business”) shall apply to the
Bank for approval by submitting documents provided in Article 7 herein, and in
addition, the following documents:
1.A photocopy of document evidencing the approval from or effective registration
with the FSC for offering and sale of offshore funds in Taiwan;
2.Business plan (including business profile, operating process and
receipt/payment procedure); and
3.List of sub-distributors and a statement supporting the qualifications of
those sub-distributors.
When a securities enterprise acts as the master agent of an offshore ETF that
is listed in NTD, the securities enterprise shall apply to the Bank for approval
on a case-by-case basis.
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〈Receipt/payment associated with sales of offshore funds〉
Article 37
When a securities enterprise acting as a master agent for an offshore fund
institution sells the funds or mandates its sub-distributors to handle the
offering and sale of the offshore funds, the related receipt/payment shall be
handled according to the following rules:
1.When the investor pays and receives funds directly to and from an offshore
account designated by the offshore fund institution, the related
receipt/payment for purchase and redemption between the investor and the
offshore fund institution shall be made in foreign currency.
2.When the investor purchases the offshore fund through the account opened by
the master agent at a domestic bank in the name of the offshore fund
institution, or a bank account designated by the centralized securities
depository enterprise, or a non-discretionary money trust managed by a trust
enterprise, or accepting orders to trade foreign securities by a securities
enterprise, the following applies:
(1)When the purchase is paid in NTD, relevant receipt/payment shall be made in
NTD.
(2)When the purchase is paid in foreign currency, relevant receipt/payment shall
be made in foreign currency.
(3)Upon receiving purchase payments and redemption proceeds that involve
exchange settlement against NTD, the securities enterprise shall carry out
exchange settlement promptly and remit the payments out to the offshore fund
institution or remit the proceeds into the account designated by the investor.
3.When an investor purchases an offshore fund with foreign currency, and then
switches into another offshore fund with a different currency, the investor
may be paid with the fund with denominated currency at the time of redemption.
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〈The reporting obligation of master agent〉
Article 38
When a master agent files a report with the FSC in events referred to in
Article 12 of the “Regulations Governing Offshore Funds”, it shall notify
the Bank.
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Subsection 9 Private Placement of Offshore Funds business
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〈Application to engage in private placement of offshore funds〉
Article 39
When a securities enterprise intends to act as the local mandated agent of an
offshore fund institution and conduct private placement to specified
counterparties (hereinafter referred to as “offshore fund private placement
business”), the securities enterprise shall apply to the Bank for approval by
submitting documents provided in Article 7 herein, and in addition, the
following documents:
1.A statement to comply with the provisions in Article 52 of the “Regulations
Governing Offshore Funds”. Such statement is not required if the
counterparties are entities provided in Subparagraph 1, Paragraph 1, Article
52 of the Regulations.
2.Business plan (including business profile, primary information of the offshore
fund, operating process and receipt/payment procedure).
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〈Receipt/payment associated with private placement of offshore funds〉
Article 40
When a local mandated agent of a privately placed offshore fund purchases fund
shares from the offshore fund institution, it shall do so in the name of the
counterparty, and the receipt/payment for settlement and fees shall be made in
the denominated currency of that fund.
When the agent reports to the institution designated by the FSC within five (5)
days from the date that the price of the privately placed offshore funds has
been paid in full, it shall notify the Bank.
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Subsection 10 Business of Conducting Wealth Management involving Foreign Currencies by Means of Trust
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〈Application to conduct wealth management business by means of non-discretionary or semi-discretionary individually managed money trust〉
Article 41
A securities enterprise concurrently conducting trust business that engages in
wealth management business by means of non-discretionary or semi-discretionary
individually managed money trust involving foreign exchange (hereinafter
referred to as “wealth management business involving non-discretionary or
non-discretionary individually managed money trust”) shall apply to the Bank
for approval by submitting documents provided in Article 7 herein and a
business plan (including business description, business counterparties, trust
framework, receipt/payment principles and declaration of foreign exchange
settlement).
When a securities enterprise that has been approved by the Bank to engage in
wealth management business involving non-discretionary or semi-discretionary
individually managed money trust subsequently increases or decreases the
number of branches handling the business, the securities enterprise shall
report to the Bank for record within seven (7) days after obtaining approval
from the competent authority.
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〈Receipt/payment associated with wealth management business involving non-discretionary or semi-discretionary individually managed money trust〉
Article 42
When a securities enterprise engages in business under the preceding article,
related receipt/ payment shall be handled according to the following rules:
1.Foreign currency non-discretionary or semi-discretionary money trust:
Receipt/payment of the trust funds between a securities enterprise and the
trustor or the beneficiary shall only be handled in foreign currency and not
paid in NTD.
2.NTD non-discretionary or semi-discretionary money trust with investments in
products involving foreign exchange:
(1) Receipt/payment of trust funds between a securities enterprise and the
trustor or the beneficiary shall only be handled in NTD. Proceeds from the
sale of foreign currency denominated products invested by the trust shall
be exchanged into NTD immediately and deposited into the NTD trust asset
deposit account – trustor sub-account. Foreign currency deposits shall be
used exclusively for settlement purpose only.
(2) When the purchase or sale of foreign currency denominated products through
the same trust account involves exchange settlement against NTD, the
securities enterprise shall carry out gross settlement through an authorized
bank or by itself if it is a DSF without offsetting or settling on a net
basis. However, for accounts receivable or payable arising from the purchase
or sale of underlying assets on the same date or sale first and then buyback
before the settlement of the sale through the same trust account of the
trustor, the securities enterprise may, according to the trustor's
instruction, combine and net off all the received (paid) money in the same
foreign currency and then exchange the net received (paid) amount into NTD.
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〈Application to engage in collective investment trust account business〉
Article 43
Before establishing a foreign currency denominated collective investment trust
account for the first time, a securities enterprise concurrently conducting
trust business that engages in foreign currency denominated collective
investment trust account business shall apply to the Bank for approval by
submitting documents provided in Article 7 herein, and in addition, the
following documents:
1.A FSC approval letter, but exempted for the collective investment trust
accounts that accept funds from professional investors only, provided it is
stated so in the application letter and reported to the FSC for record in
accordance with the “Regulations Governing Management and Utilization of
Collective Investment Trust Funds”;
2.A management and utilization plan for the foreign currency denominated
collective investment trust account;
3.The risk level of the collective investment trust account and the risk
tolerance level of investors who could bear the risk of the account, but
exempted for the collective investment trust accounts that accept funds from
professional investors only, provided it is stated so in the application
letter; and
4.Terms and conditions of the collective investment trust account agreement.
A securities enterprise establishing a NTD denominated collective investment
trust account that involves foreign exchange settlement against NTD shall apply
to the Bank for permission to carry out foreign exchange settlement by
submitting documents provided in Subparagraphs 1 and 4 of the preceding
paragraph, a declaration statement and an account asset schedule.
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〈Receipt/payment associated with collective investment trust account business〉
Article 44
Securities enterprises shall observe the following rules when handling
receipt/payment associated with business under the preceding article:
1.Foreign currency denominated collective investment trust account:
Receipt/payment of trust funds between a securities enterprise and the
trustor or the beneficiary shall only be handled in foreign currency instead
of NTD.
2.NTD denominated collective investment trust account with investments in
products involving foreign exchange: Receipt/payment of trust funds between
a securities enterprise and the trustor or the beneficiary shall be handled in
NTD only.
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〈Matters for compliance when engaging in wealth management business by means of trusts〉
Article 45
When a securities enterprise concurrently conducting trust business that engages
in wealth management business by means of non-discretionary or
semi-discretionary individually managed money trust, the qualifications of the
trustor shall meet the criteria set out in Subparagraph 1 of Point 9 and
Subparagraph 1 of Point 10 of the “Operating Directions”.
There shall be no transfer of funds between the NTD and foreign currency
denominated non-discretionary or semi-discretionary money trust accounts of the
same trustor or different trustors.
When a securities enterprise concurrently conducting trust business with
investments in products involving foreign exchange, such products must be
denominated in foreign currency and shall not involve or be linked to NTD
exchange rate or NTD interest rate index.
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